YAISHWARYAJ: KESC approves coal power generation project (24.8.130

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http://www.dawn.com/news/1037846/kesc-approves-coal-power-generation-project

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KARACHI, Aug 23: While the Karachi Electric Supply Company (KESC) Shareholders Association raised some doubts over the KESC leasing of Unit-3 and Unit-4 of the Bin Qasim Power Station-1 to a newly-formed company for 20 years for coal conversion, an extraordinary general meeting held at the Fleet Club on Friday granted approval to the project.

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The KESC is leasing out the units to a foreign company from which the power utility will also be buying electricity after they have been converted to coal power generation units for which they were seeking approval from its shareholders, according to the association.

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"The meeting called by the KESC was more of a legal requirement. We registered our doubts, of course, but we already knew that it will be of no use and absolutely futile as the major share in the company, 99 per cent, is controlled by KESC Power and the Government of Pakistan and the general public have only 1pc. So our say doesn't amount to much," said KESC Shareholders Association General Secretary Choudhary Mazhar Ali.

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In the absence of KESC CEO Tabish Gauhar, the meeting was conducted by KESC executive director Tayyab Tareen.

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KESC chief business development officer Dr Naveed Ahmed said the project would bring a three-way improvement as the government would save foreign exchange as it would not have to import oil, KESC consumers would receive electricity on cheaper rates and its shareholders would also benefit as KESC would make more profit.

Mr Ali said that BEEG Investments owned 99.98pc of the newly-formed company K-Energy to which KESC was leasing out the units. Only 00.01 per cent shares were with the two Pakistanis, Shaheryar Arshad Chishty and Chaudhry Abdul Qayyum, he said.

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"As far as converting units to coal and generating power are concerned Abraaj Group and the KESC should have done this. It seems rather strange that the KESC with technical know-how and financial contacts will be leasing out two units to another unknown company and then buying power from it," he added.

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Mr Ali said that the KESC wanted to sell this coal power for Rs9.5 per unit but international power generation companies say that it should cost 7.8 cents, which came up to around Rs8 per kilowatt. "The extra one-and-a-half rupee should not be there and the National Electric Power Regulatory Authority should decide the rates," he suggested to which the KESC agreed.

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Another shareholder, Arif Bilwani, a leading industrialist, wanted to know why the KESC was converting Unit-3 and Unit-4 when Unit-1 and Unit-2 needed conversion first as their efficiency was worse. The KESC officials explained to him that Unit-4 was out of order with broken wiring so they preferred working on it first. Asked if there were any plans for converting Units 1 and 2 also, the KESC officials said there were.

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Mr Bilwani also observed that the project costs US$300 million funding and buying new units would cost less instead of fixing old units. But the KESC representatives said that since there was no space for new units, they would have to work on the ones they already have.

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A Dawn reporter was not allowed to cover the EGM. The KESC when requested for their side later said that K-Energy has been formed for the purpose of implementing the coal conversion project as an Independent Power Producer (IPP) structure. "This company is backed by foreign investors consisting of a consortium of Indonesian Industrial group, Hong Kong, and Korean private equity investors. Some of these investors are also involved in other energy projects in Pakistan," said a spokesman for the power utility.

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The KESC also explained that bids for the project were floated last year and a great response was received in the form of six bids from leading Chinese contractors including Harbin Electric, Shanghai, Dong Fang and Sinohydro. Currently, detailed technical and commercial negotiations are under way between the short-listed contractor and the KESC. A leading O&M contractor with required expertise on coal-based plants will be engaged by K- Energy from Korea/China to run the plant post commercial operations.

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He said cash cost of conversion project was significantly less than a new coal fired project of the same size. The project will come online in two to two and a half years compared to a new plant that takes four years. "Net emissions of pollutants will reduce after conversion. The EIA study has been conducted by Hagler Bailly," he said.

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